Becoming a new mom is an exciting and challenging time in your life. Along with all the joys of motherhood, you must also consider new financial responsibilities.

Financial planning for new moms involves many considerations, from budgeting for diapers and baby food to planning for their future education and other unexpected costs.

Let's look at some important financial planning tips you should remember as a new mom.

1) Review your budget and finances 📝 

Now that you have a new member in the family, it's important to review your budget and make any necessary adjustments. Consider any changes in income, expenses, and savings goals that may arise with a new baby.

Doing Well is here to provide personalized support and guidance that aligns with the dynamics of your evolving family. 

Create a realistic budget that accounts for all your current and future expenses. This will help you stay on track with your finances and avoid overspending.

Here are some practical tips:

• Track your monthly income and categorize expenses to identify any areas for adjustment.
• Cut back on unnecessary expenses, such as dining out or subscriptions you may not use frequently.
• Look for ways to save money, such as using coupons, buying items in bulk, or purchasing second-hand baby items.
• Consider setting up a separate savings account for your child's future expenses.

2) Check your leave options ✅ 

Certain employers and state initiatives provide maternity and/or paternity leave benefits. Here’s a quick guide:

• Maternity/Paternity leave: Check the duration and whether it’s paid or unpaid. Under the Family and Medical Leave Act (FMLA), eligible employees are entitled to 12 weeks of unpaid leave.
• Short-term disability: Some workplaces offer short-term disability for childbirth, which can cover a percentage of your salary.
• State programs: Certain states have their own paid family leave programs. It’s important to research whether your state offers such benefits.
• Vacation/Sick days: Consider using accumulated vacation or sick days to extend your leave.
• Employer-specific programs: Some companies have unique parental leave policies or benefits, so discussing options with your HR department is essential.

3) Understand the expenses of raising a child 👶 

Parents, on average, spend $233,610 to raise a child until they turn 18. This figure excludes the annual costs of college.

Understanding the costs of raising a child is important, including both one-time and recurring expenses. Here are some examples and the estimated costs of each:

Average one-time costs

Average ongoing expenses

4) Start (or build upon) an emergency fund 🐖 

Having an emergency fund is crucial for new moms. This financial cushion can help cover unexpected expenses like medical emergencies or job loss. You should save at least three to six months' worth of expenses in your emergency fund.

If you don't have an emergency fund, start building it by setting aside a small portion of your monthly income. If you already have one, consider increasing the amount you contribute each month to account for any additional expenses that may arise with a new baby.

5) Shop for insurance—both life and disability 🛡️

As a new mom, reviewing and updating your insurance policies is important. Consider purchasing or increasing coverage for both life and disability insurance.

6) Review and update your beneficiaries 👩🏼‍👨🏼‍👦🏼‍👧🏼

As a first-time mom, ensuring your child's welfare is crucial to securing their financial future. One way to do this is by reviewing and updating your beneficiaries on all your accounts, including life insurance, retirement plans, and bank accounts.

Make sure your child is listed as a beneficiary on these accounts. You may also consider setting up a trust for your child's inheritance. Consult an estate planning attorney or financial advisor for the best options for you and your family.

7) Create a power of attorney 👨‍💼

A power of attorney (POA) is a powerful tool that allows you to appoint someone you trust to manage your affairs if you cannot do so yourself.

This could be due to illness, disability, or other unforeseen circumstances.

It ensures that your financial foundation remains intact and your family's needs are met even during unexpected events.

8) Create or update your estate planning documents 📁

Along with creating a POA, reviewing and updating your estate planning documents is important. It includes your will, trust, and any other legal documentation outlining the distribution of your assets.

The POA also outlines who will care for your child/children if something happens to you. This will ensure that they're cared for by someone you trust.

Additionally, the rules surrounding minors inheriting money or assets can be complex, making it important to consult an estate planning attorney or financial advisor. They can help ensure everything is in order and tailored to your needs and wishes.

9) Take advantage of tax breaks and benefits 🧾 

Having a child can potentially provide you with some tax breaks and benefits. Some common ones include:

• Child and Dependent Care Credit: This program offers a 20% to 35% claim on your care expenses, allowing for a maximum claim of $3,000 for an individual or $6,000 for a family of two or more.
• Dependent Care Flexible Spending Account (FSA): This account allows you to save pre-tax money for childcare expenses, which can save you money on your taxes.
• Earned Income Tax Credit (EITC): This credit is available to low—and moderate-income working individuals and families, including those with children. It can potentially reduce your tax bill or provide you with a refund.
• Adoption Tax Credit: If you have adopted a child, you may be eligible for a tax credit of up to $15,950 per child.

10) Start saving for your child’s education 👨🏻‍🎓

College may seem far away, but it's never too early to start considering your child's education. The earlier you start saving, the more time your money will have to grow.

Some options for educational savings include 529 plans, Coverdell Education Savings Accounts (ESAs), and custodial accounts (UGMA/UTMA). Consider discussing these options with a financial advisor to determine which fits your needs and goals best.

11) Start saving for yourself (or boost your contribution) 👵🏻

As a new mom, your natural instinct is to use all your resources to secure your baby's future. However, it's equally important to save for your retirement.

There are multiple avenues for your child to finance their college education—scholarships, student loans, and grants—but your retirement savings don't enjoy the same flexibility.

Consider these actionable steps:

• Assess your current retirement savings: Evaluate what you've already saved and how to improve it.
• Increase contribution gradually: Incrementally boost your retirement account contributions to ease into your new budget.
• Consult a financial planner: Professional advice can help tailor an investment strategy that fits your unique situation.

12) Make a plan for returning to work 👩🏻‍💻 

Whether you plan to return to work after having a baby or not, making a career plan is important.

If you're returning to work, consider these steps:

• Start planning early: Consider childcare arrangements and logistics before your maternity leave ends.
• Talk to your employer: Discuss any accommodations or adjustments you may need upon returning to work. Also, inquire about any childcare benefits or flexible work arrangements offered by your company.
• Prepare for potential challenges: Returning to work after having a baby can be emotionally and physically draining. Consider seeking support from other working moms or joining a working moms group.

If you're not returning to work, consider these steps:

• Plan your finances carefully: Adjusting to a single income can be challenging. Ensure you have a solid financial plan to support your family.
• Consider alternative income streams: Explore options like freelancing, part-time work, or starting a small business to supplement your household income.

Staying on track financially as a new mom

New moms face the challenge of adjusting their financial plans to accommodate the needs of their growing families. Doing Well is here to support you in this transition by providing you with the tools and knowledge necessary to:

• Create a flexible budget supporting your growing family's needs while prioritizing your and your child's future.
• Explore and utilize family-friendly financial aid and savings plans, ensuring a secure foundation for your little ones.
• Strategically plan for you and your child's long-term financial well-being, including education funds and inheritance planning.
• Boost your financial literacy, enabling you to make choices that benefit your family’s immediate needs and future aspirations.

Remember, managing your finances isn't just about daily expenses; it's about ensuring a prosperous future for you and your child. With Doing Well as your partner, confidently handle personal finance with clarity, making decisions that benefit your family now and in the future.

Book your free consultation here.